Audit Report: DOE-OIG-19-35

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June 10, 2019

The Department of Energy’s Management of the ActioNet Information Technology Support Contract

The Department of Energy’s Office of the Chief Information Officer (OCIO) is tasked with information technology (IT) responsibilities that include maintaining a technical architecture, procurement of IT goods and services, project management, and cybersecurity.  Under the cognizance of the OCIO, the Energy Information Technology Services support function is responsible for administering technology services such as system and data hosting, network and video services, telecommunications, and enterprise applications such as electronic mail services.  To support the OCIO’s mission, the Department awarded a cost-plus-fixed-fee contract to ActioNet, Inc. in October 2011 to provide IT support services to the OCIO and other Department programs and field sites.  The contract was awarded with a 2-year base period and a 2-year option period with a ceiling value of approximately $485 million.  Although the contract was expected to be re-competed in April 2016 after the full option period was exhausted, it was extended several times.  Currently, the contract is extended through April 2019, and the ceiling value has increased to approximately $1.2 billion.

Since at least fiscal year 2010, the Office of Inspector General has identified contract management as a significant challenge at the Department.  For instance, our most recent report on Management Challenges at the Department of Energy – Fiscal Year 2019 (DOE-OIG-19-07, November 2018) identified weaknesses with contract oversight, including subcontractor management.  Due to continuing IT and contract management challenges, we initiated this audit to determine whether the ActioNet IT support contract was properly managed in accordance with Federal laws and regulations and Department requirements.

We found that the Department had not effectively managed the ActioNet IT support contract in accordance with Federal and Department requirements.  In particular, the Department may have spent significantly more than necessary for direct labor costs over the life of the contract as a result of inadequate management of the contract.  In addition, the use of subcontractors by ActioNet increased exponentially from what was initially anticipated, without adequate procedures in place to ensure that the need for additional subcontractors was warranted or that costs were fair and reasonable.  Furthermore, multiple extensions to the period of performance, which were considered significant changes to the ActioNet contract, were not supported by documentation or other appropriate contract management actions.

Without significant improvements, the Department may continue to encounter weaknesses related to managing and overseeing the ActioNet contract, as well as future IT contracts.  The problems identified during our review placed the Department at an increased risk of misusing taxpayer dollars and reimbursing costs that may not be allowable, reasonable, or necessary.  As noted in our report, we determined that the Department may have spent at least $33 million more than necessary over the life of the contract for direct labor and related fees.  We also questioned the approximately $261 million paid for subcontractor labor due to the lack of documentation to support cost reimbursements.  In light of the weaknesses identified, we made six recommendations that, if fully implemented, should help the Department improve IT contract management activities.

Topic: Management & Administration